Personal loan is a short to medium term unsecured loan (no collateral) that you can use to meet your financial needs. Though most commonly used to meet expenses related to debt consolidation, vacations and unexpected medical expenses, a personal loan may be used for practically any type of expense.

Features and Benefits of Personal Loan

No Collateral Required: Personal loan is an unsecured loan which means a loan offered without keeping any assets (e.g., house or car) as collateral. These loans are offered on the basis of an applicant's credit history, income details, age, etc.

Multipurpose Use: Unlike other loan options, personal loan can be used as per the requirements of a borrower without any preconditions. It can be used to overcome any financial constraints, which may arise due to a medical emergency, debt accumulation, sudden travel plans, house renovation, etc.

Flexible Tenure: In personal loan, borrowers get flexible tenure of up to 5 years to repay the loan amount, thus, making it more preferable than other credit options such as credit card loans or gold loans.

Simple Documentation Process: To apply for a personal loan minimum documentation is required and is often approved within 48 hours of submitting an application.

Flexible Quantum of Loan: Based on a borrower’s repayment history, monthly income, age, profession, employer and other such factors, lenders offer personal loan for requirements as low as Rs. 10,000 to as high as Rs. 40 lakhs, depending on the concerned lending institution.

Any Indian citizen be it a salaried professional or self-employed individual is eligible for a personal loan. Since the loan is unsecured, therefore, the lending risk factor involved in these loans increases considerably. To reduce the same, there are a few eligibility criteria that must be met primarily to get a loan. The eligibility criteria might differ from one lender to another; however, there are a few basic eligibility criteria that are common for most lenders. Some of the factors on which the eligibility criteria are based are given as follows:

Repayment Ability: Applicant should have worked for an organisation or been involved in a business for a certain number of years.

Income: Applicants should have the lender stipulated monthly repaying capacity or minimum salary.

Age: Applicant must qualify for the applicant age bracket defined by the lending institution

Credit Score: Applicant should have the bank specified minimum credit score and good credit history.

Existing EMIs: Applicant should not have any other loan liabilities or must have strong ability to take additional debts.

Personal Loan Eligibility Criteria

The table given below summaries the basic eligibility criteria required by most banks and NBFCs for individuals requesting a personal loan:

Multiple offers, single platform: Paisabazaar.com, India's premier loans and cards marketplace, has collaborated with various public and private sector banks to offer you varied personal loan offers on a single online platform.

Our forte, your benefit: Our expertise in identifying the right deal is a benefit for those looking to take personal loan. To make sure that you take a well-informed decision, we have broken down different aspects that decide how best the loan type would match your requirement. To help you skip the fine print, we have segregated the sections - EMIs, eligibility and maximum loan amount, so that you pick only what you need.

Compare different schemes, and then decide: At Paisabazaar.com, you are saved from the hassle of visiting individual sites of banks and other lenders to compare personal loan options available to you. We have a platform where you can compare schemes by different banks and NBFCs offering personal loans

Check for loan eligibility: The personal loan eligibility calculator at Paisabazaar.com checks for the user’s personal loan eligibility in an instant. It helps you know the exact amount that you can borrow as per various eligibility factors such as income, loan tenure, etc.

Check for loan EMI: Use our Personal Loan EMI Calculator and check what your loan EMI will be before applying for it. If you already decide on an EMI amount, you are better prepared to manage your finances.

We help you apply online: No doubt, online services save time as well as money. We further ease the experience of online personal loan application by offering our efficient customer service to answer all your concerns while you are applying

Get e-Approval, instantly: After successfully submitting your personal loan application online at our website, get an instant e-approval in just a few seconds.

Privacy and transparency, assured: All personal loan applications submitted with Paisabazaar.com are sent electronically to the concerned bank department assuring complete privacy and transparency.

You will get an instant conditional e-Approval from the banks. Furthermore, our team will guide you through the documentation process required to be done for loan processing and disbursal.

Points to Consider Before Applying for Personal Loan

Personal loan allows you to borrow money for almost all your requirements and to have a better experience, there are certain points you must know before availing a personal loan.

Loan Amount & Tenure: Depending on your income and repayment capacity, decide upon the loan amount you need and for how much duration.

Eligibility: Check out eligibility criteria of different banks and identify in which one do you fit the most.

Processing Time: For your immediate monetary requirements, knowing about the processing time of personal loan can be of great help.

Interest Rate & other charges: Your complete loan experience depends upon the interest rate, processing charges, prepayment charges and other such charges. Know them before hand to take a well-informed decision.

Repayment History: Your financial health will define your credit worthiness. Make sure you have all the necessary documents to prove your strong credit history and income.

Documentation: Jot down the list of documents required to apply for personal loan.

Foreclosure: Do not ignore independent foreclosure policy and charges of different banks.

Before you apply for a personal loan, it is important that you have a budget in mind as well as an EMI amount that you are comfortable with. The EMI calculation helps you ensure that your monthly budget is not stretched and you minimize the chances of default on your personal loan. Use our EMI Calculator to get the EMI amount based on your inputs such as loan amount, interest rate and loan tenure.

Personal Loan EMI Calculator

Personal loan EMI calculator proves to be the most valuable personal loan comparison tool. No doubt, personal loan is one of the simplest loan types with no obligations connected regarding usage of the borrowed money, still there are several aspects to consider, which can be easily done via personal loan EMI calculator. A personal loan EMI calculator helps you to:

Identify the right amount you need to borrow

Figure out the amount of interest you would have to pay

Know the most suited tenure for personal loan

Borrow with the most competitive personal loan interest rate

Personal Loan EMI Calculator Table

To get an idea about how personal loan EMIs are computed, take a look at the table given below:

Important Points to Remember When Applying for Personal Loan

Check and compare interest rates and other charges for different loan offers.

Look for zero processing fees and zero-penalty for pre-payment option. If it is not available, then prefer loan offer that involves minimal cost. At times, additional costs add up and make a huge difference even after you are offered lower interest rates.

Look for payment delivery charges such as early payment charges.

Carefully look at the risk involved for situation when you are unable to repay the loan amount.

Always ask for customized personal loan quotes from at least three providers, as many banks offer personalized plans.

Don’t just fall for lower rates; check whether the banks are offering it on flat interest rate or reducing balance.

Learn about personal loan guarantor terms and conditions.

Read the offer document carefully before signing the dotted line as a guarantor and in general.

How to Improve Your Chances of Getting a Personal Loan?

To ensure your personal loan is approved by lenders, here are 5 simple tips to follow:

Know your credit score before applying for the loan: Your credit score plays an important role in getting your loan application approved. A high credit score implies that you have maximum chances of getting your loan approved while a low credit score reduces your chances to getting the loan. Knowing your credit score beforehand will save you from unnecessary rejection and hard enquiry.

Choose your lender as per your credit score: Each lender has their own loan approval criteria. Some lenders accept loan application of those with 750 credit score while others may require at least 800 to lend you money. According to your credit score, the lender that you choose will offer customized offers as per your specific needs.

Submit all relevant documents: Personal loan requires minimal documentation; hence there is no margin for error. Read through the document requirements carefully before you submit the loan application. Proper documentation results in quick disbursal of funds. Submitting incomplete or incorrect documents will stretch the loan processing time and may also get your loan application rejected.

Check your debt-to-income ratio: Your income and the loan amount that you wish to apply for should be proportionate. If you apply for a loan amount which is much higher than your monthly income, then your loan application might not get accepted. Hence, you should choose your loan amount very sensibly to ensure that you get the loan.

Asking for a loan amount as per what you want rather than what you need

Signing the loan-related documents without properly reading or understanding them

When Should I Apply for a Personal Loan?

You can apply for personal loans for ‘n’ number of reasons. Some of them are stated as follows:

At the time of financial or medical emergency: Personal loans are disbursed quickly, therefore, they are best suited for financial emergencies. Since they can be used for any purpose, you can avail it to fund big medical expenses.

When you wish for less documentation: To apply for personal loans, you require minimal number of documents. Therefore, its documentation process is simpler and faster than many other secured loan options.

When you want money to fulfill multiple purposes: If you want money to fulfill multiple financial commitments, apply for personal loans. Unlike for many secured loans,

To consolidate your debts: Finding difficult to track multiple loan and credit card EMIs? If yes, you can consolidate them by taking a personal loan. Doing so will not only making repaying debts easier but also will save on the interest amount.

When you do not have collateral: If you do not have collateral or do not wish to put your collateral at risk, apply for personal loans as these loans are unsecured, which implies that it does not require collateral.

Factors that Affect Personal Loan Approval

The approval on your personal loan application depends on various factors. Some of them are as follow:

Income: Since, personal loans are unsecured loans, therefore, its eligibility criteria is more stringent than secured loans. Your income will give assurance to lenders that you will be able to repay the borrowed amount without fail. If your income is not sufficient, the lender will not approve your loan application.

Employment stability: Stability is yet another important factor which gives lenders an assurance that the borrower will repay the loan on time. If the loan applicant is a job hopper then he/she will not get loan as lender will not have confidence whether the borrower will have steady income to repay the amount on time.

Age: Most banks and NBFCs offer loan amount to people between 21 to 60 years of age. The younger you are, the more will be the chances of getting the loan approval.

Outstanding debt: Personal loan approval also depends on whether you already have an outstanding debt or not. If you have an outstanding debt, then the lender might reject your loan application or might approve loan of a lesser amount.

Factors that Affect Personal Loan Interest Rate

Different banks and non-banking financial companies offer different interest rates for personal loans. As of now personal loans are available in India from 10.99% onwards. The rate of interest applicable to a specific person depends on various factors. Some of the major factors are explained as follows:

Credit History: Your credit history helps lenders analyse your repayment behaviour. If you have a poor credit history, you will get personal loan at higher interest rates.

Income: For lenders your income is an assurance of repayment. Therefore, the more you earn, lesser will be your personal loan interest rate.

Employer: When examining your loan application, lenders also consider the reputation of the organization you work with. You can enjoy lower interest rates on personal loans if you are associated with a well-known and stable organization.

Lender-customer Relationship: If you are planning to apply for personal loan with the bank you have an account with, your good relationship with your lender can also help in getting you lower personal loan interest rates.

In addition to the rate of interest, borrowers must also consider other charges such as pre-processing fees, foreclosure charges, etc. before applying for personal loan.

Personal Loans can help you manage all kinds of money troubles; however they come with certain pros & cons, which you must know. Here are disadvantages and advantages of personal loan:

Advantages:

Does not require collateral: It does not require any collateral or security to avail a personal loan; you can easily apply for a personal loan, as long as your credit score is good.

Involves minimal paperwork: As compared to other secured loans, personal loans require much less documentation.

Offers quick approval and disbursal: Several banks have introduced e-application process which is faster as well as hassle free. Some banks even offer pre-approved personal loans and e-approvals.

Involves no capping on the loan amount: There is no capping on the usage of borrowed personal loan amount unlike other secured loans.

Disadvantages:

Have stringent eligibility criteria: While the guidelines for availing personal loan vary from bank to bank, qualification criteria are quite strict. It is must to have a good credit history to avail personal loan.

However, you need to check with your existing lender whether they allow balance transfer or not. Also, check for any penalty that they may levy on personal loan balance transfer. Take personal loan balance transfer only if you get lower rate of interest from the new lender. There might also be a few charges such as balance transfer fee and prepayment charges applicable to the procedure, which you must discuss with your new lender beforehand.

How to Get Personal Loan with Low Credit Score?

Your credit score reflects your creditworthiness and that is why there is a high chance of loan rejection for people with low credit score. To get loan despite low credit score or CIBIL score, you will have to take some measures to prove to your lender that you will repay loan on time. Some of them are mentioned as follows:

Show income proofs: If you have recently got a notable increment, then you can show relevant documents to your lender to assure them that you can repay the loan amount comfortably and on time. Meanwhile, you can work on improving your credit score.

Check out peer-to-peer lending: Peer-to-peer lending is not a mainstream lending. But when banks and leading NBFCs are not ready to lend you money due to your low credit score, you can go for peer-to-peer lenders. You might have to pay high rate of interest for such loans but as there is no other option, you might have to go for these lenders.

Make your spouse or family member co-applicant: If your spouse or any other close family member has an excellent credit score, then you can take their support when applying for personal loan. You may ask them to apply for the loan and you can be the co-applicant. You can also ask them to be your joint applicant.

Apply for secured personal loans: Personal loans are usually unsecured loans. But if you have a low credit score, you can go for secured personal loan. In this, you will have to offer any valuable asset as collateral. You can give FDs, assets, shares, or gold as your collateral.

Personal Loan against Mutual Funds

Most banks consider Loan against Securities as a separate category however, in some cases, they are considered to be a type of a secured personal loan. Hence, you can take personal loan against mutual funds. If your income is lower, your mutual fund investment will make up for it and enhance your loan eligibility. Also, the rate of interest charged on the loan will be lower than the rates applicable in case of an unsecured personal loan. If the borrower defaults on the loan, then the lender can ask for mutual fund units to be redeemed. The amount collected will then be used to repay the lender.

Loan sanctions are entirely dependent on lenders. Therefore, there is no fail-proof formula to get your loan sanctioned. However, you can follow these steps to eliminate all possible reasons of rejection:

Ensure you meet the bank/NBFCs eligibility criteria.

Check for inaccuracies of information in your credit report. Get free credit report from Paisabazaar.com

Compare interest rates: Do not go for the first offer that comes your way. Always compare personal loan interest rates offered by different lenders before choosing a deal. Since going to each lender’s website to see personal loan interest rates would be too inconvenient, therefore, visit online lending marketplaces such as Paisabazaar.com where you will get personal loan interest rates by various banks and NBFCs consolidated at one place.

Compare other loan fees and charges: Interest rates are a major deciding factor but not the only one. Borrowers before settling for a personal loan offer must look at various loan charges and fees levied by lenders. The fees and charges usually associated with personal loans include processing fees, late payment charges, loan cancellation charges and service tax for each service given by the lender. Out of all this, processing fee is the most important component in a loan and is usually charged between 1% and 3%.

Look for repayment flexibility and related charges: Personal loans comes with prepayment and part-payment charges. This implies that if you want to repay the loan amount in advance (before the tenure ends), you will have to pay a certain small amount for it some lenders may not levy any foreclosure charges, however, others might charge 2% - 5% of the loan amount. Personal loan prepayment might help you get rid of the debt soon but it still pushes you back by about ₹10,000 to ₹30,000 on a let’s say 6 lakh loan.

Decide on how much you can afford each month: Before you apply for personal loan, you need to be sure that you will be able to repay the loan on time without any penalties. To ensure you pay each of your loan installment full and on time, know the estimate of the loan EMI that you will be comfortable in paying each month. Instead of manually calculating that yourself, save time and use Paisabazaar.com’s comprehensive Personal Loan EMI calculator. The EMI calculator factors in details such as loan amount, tenure and interest rate and on the basis of this give you results in a few seconds.

How to Choose Personal Loan Tenure?

Understand your monthly expenses: Calculate your monthly expenses and vet it against your monthly income to find out how much you are left with. Based on the left over amount, you can decide on a tenure and accordingly on an EMI that works well within your budget.

Consider existing financial liabilities: If you have existing financial commitments or liabilities, take them into account when choosing an appropriate personal loan tenure. Decide on a tenure which helps you balance all of your existing obligations without much trouble. Also remember, longer the loan tenure, smaller will be the EMI, which will in turn put less burden on you every month especially when you are juggling with other financial liabilities.

Use a personal loan EMI calculator: To make the process of choosing personal loan tenure easier, use Paisabazaar.com’s EMI Calculator. This online tool is easy to use and quick to give results. It gives you an all-round view of the calculations involved in a loan. With the help of this tool, compare loan offers from various banks in an instant and choose the one which meets your requirements.

Ans: Banks mostly based their loan amount based on the maximum EMI amount that the individual can afford. This EMI usually capped at 30% to 40% of the applicant's net take home salary. If you have any existing loans, the maximum personal loan EMI will drop accordingly.

Q. Does my credit history and score affect my chances of a successful application?

Ans: A personal loan is usually based on criteria such as your monthly net income and your previous credit history including score. Hence, credit score plays a key role in both ensuring the success of the application as well as in determining the interest rate of the loan.

Q. Is there a prepayment penalty on personal loan?

Ans: Yes. Most banks and NBFCs charge a prepayment penalty of 1% to 3% on the outstanding principal amount of a personal loan.

Q. Can I get a personal loan for pensioner if I have a pension account with one of the leading private banks in India?

Ans: There are several private as well as public sector banks, which offer personal loan to pensioners. However, there is certain age cap with every bank, which you must not exceed at the time of repayment period. You can get a personal loan of up to 10-20 times (depending upon banks' T&C) of your monthly pension amount.

Q. I want to buy a car for commercial purpose. Should I take Car Loan or Personal Loan?

Ans: To buy a car for commercial purpose you would either have to apply for personal loan or commercial vehicle loan. Commercial vehicle loan are comparatively cheaper than personal loan, however there are some specific eligibility criteria that you need to fulfill. In case, it is difficult to meet the eligibility criteria of commercial vehicle loan, you can avail a personal loan.

Q. How can I bargain for better rate of interest for personal loan?

Ans: Yes, there are certain points that can help in getting lower interest rates for the borrowed personal loan amount.

Due to competition, several banks announce schemes on personal loans during festive season. Request for a personal loan quote at this time as such seasonal offers are good to get attractive interest rate deals.

Credit score can be a reason of rejection, and it can be a reason to get a better deal. You may bargain with banks for best personal loan deal on having a high credit score.

A good track record for repayment of loans can be helpful in getting attractive deals

Q. Are personal loans taken as tax exemptions?

Ans: As per the Income Tax Act (ITA), there is no specific deduction allowed for personal loans. However, if you are taking personal loan for the purpose of home renovation, then you are liable for tax exemption under Section 24 (b) of the ITA.

Q. Can a student apply for a personal loan?

Ans: A student can apply for a personal loan, provided he/she has a stable and sufficient source of income. Also, his/her age must fall in the acceptable age criteria set by the lender. The student must also fulfill all other required criteria set by the lender.

Q. Which is better, personal loan or a credit card loan?

Ans. A personal loan is better than a credit card as the rate of interest on credit card loan is higher than the rate of interest applicable on personal loans. Some banks also calculate interest on loan on credit card at flat rate which means that the overall interest outgo will be much higher.

Q. Can I prepay my personal loan without any extra charges?

Ans. Unless there is a special offer from your lender, banks and NBFCs levy prepayment penalty from 1% to 5% on the outstanding principal amount of a personal loan.

Q. My credit score is below 750. Will I get a personal loan?

Ans. It depends on the eligibility criteria set by the lender. Some lenders might lend money to applicants with low credit score but the interest rate applicable will be comparatively higher.

Q. What is the impact of GST on personal loans?

Ans. The impact of GST on personal loans has not been much. The service tax earlier was levied at 15% and now it is 18%. There has been an increase of 3% in your service tax. Moreover, taxes are not levied on EMIs. However, the one-time costs including processing fee, prepayment charges, etc. will rise as these costs are paid for a service and thus will attract service tax.

Q. Can I get a personal loan if I have home loan?

Ans. You can apply for personal loan even if you already have a home loan, provided your lender is assured that you can repay the loan without fail. However, it is not advisable to take several loans simultaneously.

Q. Is it good to pay off credit card debt with a personal loan?

Ans. Yes, it can be a good idea if you have multiple credit card debts. The rate of interest applicable on a personal loan is lesser than the rate of interest applicable on a credit card. Hence, taking personal loan to consolidate your credit card debts will save on the total interest you pay to lenders and also make loan repayment easier.

Q. What if I don’t pay the EMI of a personal loan?

Ans. If you miss to pay personal loan EMI, then your credit score will decrease and the loan burden on you will increase. In case, there is default on loan, preliminary notices will be sent to the borrower by the lender mentioning the outstanding balance and the penalty charges. The bank may also go for legal proceedings or approach the guarantor (if any).

Q. What is minimum salary required to get personal loan?

Ans. The minimum salary required to get a personal loan differs from one lender to another. Most banks have set their minimum salary requirement to ₹15,000/-.

Q. What is the best credit score or CIBIL score to get a personal loan?

Ans. Your credit score is a 3-digit number between 300 and 900 that gives potential lenders a quick idea of your creditworthiness. Higher your credit score, the better it is. But it is generally advisable to have a minimum credit score of 750 to get a loan. But some lenders might ask for a higher credit score to be eligible to apply for a loan. Therefore, keep your credit score or CIBIL score as high as possible.

Q. How do I cancel personal loan after the loan is disbursed?

Ans. You cannot cancel personal loan after the loan is disbursed. But you can prepay the loan amount on which your lender may levy prepayment penalty.

Q. Can I get personal loan without a salary slip?

Ans. Yes you can get personal loan without a salary slip. However, it also depends on the lender’s policies. Your bank account statement, a copy of form-16 of last two years, employee certificate from your employer, etc. documents can be enough proof of your income and employment. To know which document might be acceptable as an income proof, you will have to approach your lender.

Q. How do I get a 20K personal loan?

Ans. The minimum loan amount that can be sanctioned on a personal loan is ₹25,000. However, you can take short-term personal loans to get personal loan of amount as low as ₹10,000 but for shorter period of 15 to 90 days. Another option for you is to get a ‘Credit Line’ or a ‘Line of Credit’. In Credit Line, a bank will issue a credit limit amount based on your KYC verification, without any collateral. It is an easy way for salaried professionals to get credit on the basis of their eligibility. If you plan on getting a Credit Line, apply for PaisaonDemand (PoD). It is instant Credit Line by Paisabazaar.com. in collaboration with RBL Bank. It is a ready-made solution to all your financial requirements.

Q. Can we use personal loan for marriage purposes?

Ans. We can use personal loan for any purpose. Be it to fund a medical emergency, consolidate debts or finance a marriage.

Q. What are the pros and cons of personal loan balance transfer?

Ans. Personal loan balance transfer is one of the effective ways to lower the overall cost of a loan. The advantages and disadvantages of personal loan balance transfer are given as follows:

Pros:

Lower rate of interest: If you are burdened with high loan EMIs, then shifting your loan to a lower rate of interest can lighten your load. Before going for personal loan balance transfer calculate the interest burden. Also, notice if there is a change in tenure and also consider the processing fees and other charges.

Lower tenure: On the basis of your loan repayment capacity, lower tenure can be quite beneficial for you. A lower tenure means you can be debt-free earlier than you expected it to be.

Improved credit score: It also gives you a chance to enhance your credit score. Paying your EMIs for a longer period can enhance your credit score. However, EMIs should be paid full and regularly.

Cons:

Processing fees: You will have to pay processing fee twice. First time when you took the loan and the second time when you transferred the balance to a new bank. So, calculate and check whether transferring funds will be beneficial to switch or not.

Cash outflow: In personal loan balance transfer, you can get easily attracted to the lower rate of interest but at the same time your repayment period is getting longer. Therefore, before opting for personal loan balance transfer, it is important to calculate the total amount you will be paying out. The total cash outflow should not be more than what you are required to pay.

Q. Can I take a personal loan from two different banks at the same time?

Ans. Yes. On the basis of your credit profile, it is up to the lenders to sanction your loan applications. Depending on your loan repayment capacity, credit history and probably other factors, the loan amount will be decided. To increase your chances of getting second personal loan approval, you can apply for loan with a co-applicant that has an excellent credit score.

Q. What are the alternatives available for personal loans?

Ans. The alternatives available for personal loans are secured personal loans. In this, you can pledge collateral of value equal to or more than the amount of the loan. Other alternatives to personal loans include secured loans such as loan against fixed deposit, gold loan, loan against public provident fund, etc.

Q. Can a doctor apply for a personal loan in India?

Ans. Yes, doctors can apply for and get personal loan in India. However, they must be eligible for it. Many banks even offer customised personal loans for doctors. Though these loans are called personal loans but its amount can be used for limited purposes. Banks usually give this loan to doctors and medical practitioners to finance the clinic set up, purchasing of new medical equipment or expansion of the clinics.

Q. How to deal with credit card debt using personal loans?

Ans. You can use personal loan to consolidate credit card debts. The loan might give you a lower interest rate on your debt or help you pay it off faster.

Q. Should I take a personal loan to fund my startup?

Ans. Yes, you can apply for personal loan to finance your startup. However, business loan is more advisable as it is specially designed for financing a new business or for refinancing a business. Both are unsecured loans, so you can choose whichever seems to fit your requirements.

09-Jan-19: NBFC Lending has Grown Massively in the Last Quarter: TransUnion CIBIL

Talking about Consumer Durable Loans and Personal Loan, the growth from the NFBC standpoint has been huge in the last quarter, said Satish Pillai, MD and CEO, TransUnion CIBIL. One of the main reason for this was the festive season that included Diwali and Dussehra that saw the numbers rise up in a big way. He also added that the Preapproval and less disbursal time were the main push why people have leaned more towards them and how it has been successful in replacing cash.